What is Libra?
Cryptocurrencies such as bitcoins are on everyone's lips and are being traded more and more frequently. So it couldn't have taken long for Facebook to follow suit. With Libra, the social network has created its own virtual currency.
But what exactly is Libra and what distinguishes this online money from other cryptocurrencies? Find out here.
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This is the Facebook Coin
Libra is a planned private cryptocurrency to be launched on the market in 2020.
The digital currency is backed by the Libra Association. It currently has 21 members. Users can buy the Libra Coin with their national currency, which means that the Facebook currency is also available in euros.
How does Libra work?
Facebook advertises digital money under the slogan "Libra is for everyone".
The principle of cryptocurrencies is that money can be transferred easily and cheaply around the world. Anyone with a smartphone or computer can therefore access Libra. Whether Bitcoin, Ethereum or Libra: the virtual currency is praised above all for its security. This is guaranteed by the technology behind it: the blockchain. It makes transfers anonymous, secure and fast.
What is blockchain and how does it work?
The blockchain is an innovative technology that allows transactions of any kind with a cryptocurrency (Bitcoin, Libra and Co.) to be tracked digitally.
This means you can trade or carry out business transactions via the blockchain. Even documents get from A to B in encrypted form.
Goodbye to post or e-mail.
You can think of it as an analog cash book in which all steps of the transaction are documented. In this case, the file is called a "block". Only a limited number of transactions can be recorded in a block, after which a new block is required. Just as if a page in the cash book is full. All blocks are linked together using an encryption technique. A chain is created, the "chain".
Launch is planned for 2020
Nobody can trade or pay with Libra yet. This is because the Facebook Coin is not due to be launched until next year. Payments can then be made as follows:
Facebook users exchange their money for Libra. Any local currency is possible.
If the mobile function is connected to the user's own bank account via the smartphone, money can be exchanged digitally at any place and at any time.
Online money is stored in a virtual wallet. Facebook has named this wallet Calibra. Not only Calibra can be used, other providers are also allowed.
Libra can then be used to make payments via Messenger or WhatsApp. We already know this from PayPal: Just transfer 10 euros to a friend for the last round of beer. From 2020, this will also be possible with Libra. Facebook assures that they have no access to the transaction data. But the EU and national and international politicians doubt this.
Political criticism is raised
Libra has had a hard time since the beginning. Politicians in particular are scrutinizing the Facebook coin.
Their main criticism is that they get little insight into Zuckerberg's coin machinery.
This week, the Bundestag Finance and Digital Committee in Germany considered Libra.
Bertrand Perez was invited to Frankfurt as Chief Operating Officer. He is a board member of the current 21 members of the Libra Association. Until recently, there were 22 members, but PayPal has already left as a partner.
The meeting focused on concerns that Libra would jeopardize financial stability at launch and enter the market without clearance from Europe. Data security is seen as particularly critical.
Facebook is in debt here: The data scandals of recent years have made users more suspicious. The German government wants to regulate the launch of Libra. But the coin is not only under pressure in Germany; the Facebook currency is also facing scrutiny in the USA.
Libra Association as strong partners
Did the company anticipate headwinds? In any case, Facebook has brought strong partners on board.
To the Libra Association website
With the Libra Association, a network of 21 partners has emerged to help Libra give birth and act as mentors along the way.
But not everyone can join the party. Applicants must be among the big players and have a market value of 1 billion US dollars. Alternatively, more than 20 million customers are also welcome. It is well known that Zuckerberg does not bake small rolls.
Those who are accepted into the Association also act as sponsors. Each partner has invested 10 million US dollars. In the summer of 2019, there were a full 28 partners, so to date Facebook has lost 7 participants, including PayPal. Why Libra got too hot for the 7 who dropped out is not known.
There should be no price fluctuations
Cryptocurrencies such as Bitcoin are known for extreme price fluctuations. Facebook definitely wants to prevent this with the launch of Libra
The company's own coins are supposed to be stable and give users planning security.
The social network is planning to link the digital currency to established means of payment. A reserve fund is to store sufficient funds in US dollars, euros and yen.
Unlike bitcoins, Libra cannot be produced by the user. Libra can only be purchased from members of the Libra Association or on cooperating trading platforms. For Facebook, entering the cryptocurrency market is a new business model.
More customers than traditional banks?
The user figures are in the realm of superlatives: 2.7 billion people are on Facebook, its subsidiary Instagram, and chat in Messenger or on WhatsApp.
The reach for digital money is therefore enormous. If only a few hundred million users used Libra, many a traditional bank would be green with envy. The potential is huge.
The breakthrough is initially expected for developing countries, as the currencies here are already unstable in themselves and mobile payment has already become established. This is still different in Austria and Germany, where hardly anyone pays via mobile wallets and prefers to use the familiar EC card or good old cash.
According to Facebook, people without an account are another target group. The mobile wallet could therefore be an independent tool for these people in the future. But there is a catch: most people without an account live in China - and Facebook is banned here. In India, cryptocurrencies are to be banned altogether.
ChecklistHow to buy coins in 5 steps
Interest aroused? You can buy coins with the following quick guide.
1. Choose a reputable trading platformwho offers the deposit method.
2. open an account
3. deposit to the new account
4. trade with the domestic currency against Libra
5. withdraw coins and store them in a wallet
Despite critical voices: The Group is sticking to its plans and wants to launch Libra in 2020. Further investors are welcome. Mark Zuckerberg has also recruited well-known crypto experts. So we can be excited.
